Question

Assume you are planning the confirmation of accounts receivable. There are 2,000 customer accounts with a total book value of $5,643,200. Tolerable misstatement is set at $200,000, and expected misstatement is $40,000. The risk of incorrect acceptance is 30%. The ratio of expected to tolerable misstatement is 20%, and the ratio of tolerable misstatement to the population is 3.5% (round down to 3% for use in Exhibit).a. What is the sample size?b. What is the sampling interval?c. What is the largest value you can use for a random start?d. Using the following list of the first 15 items in your population a random start of $25,000, and a rounded sample interval of $100,000, identify the items to be included in your sample.

e. What is the probability of selecting each of the following population items, assuming a $100,000 sampling interval?

f. Why might the final sample size include fewer logical units than the computed samplesize?